Eliciting useful reference checks

They haven't been to jail but have they left a trail?

November/December 2006

ByDr. Carol Johnson, Educator Associate

Employers sometimes quake in their boots when they can't get detailed references for possible new hires. But fraud examiners can help their bosses glean information from references that can prevent disastrous hiring decisions and costly frauds.

You've verified the job applicant's education credentials. You've completed a criminal history check and a credit check. You've called past employers, who have verified her dates of employment, but that's all they'll tell you. She's never been charged with a crime or gone to jail, so is she a safe hire?

The ACFE's "2006 Report to the Nation" indicates that only 8 percent of fraud perpetrators had prior convictions for fraud.1 You might interpret this statistic to mean that 92 percent of fraud perpetrators have never committed fraud before, so they haven't left a trail. But the statistic probably means something quite different - that many have committed fraud before but never faced the music. If they haven't been prosecuted, how can we check job references in a manner that will help reveal their trail of misdeeds?

Consider the following true cases that have recently come to my attention:

A minister suspected of child molestation was passed on to another church with a glowing letter of recommendation that focused on his better traits. Since that time, he has passed through two more churches. No prosecutions have ever taken place.

The minister's wife, a nurse, was terminated for stealing pain medications from her patients' intravenous drips and substituting saline solution. Since that time, she has passed through six more medical employers. No prosecutions have ever taken place.

An employee at a property management firm was fired for embezzling and took a job three blocks down the street within the week. No prosecution took place, and no one was asked for a reference.

Following 10 years of parents withdrawing children from a daycare provider's home because of strange behavior exhibited by their children, the provider was charged with homicide in the death of one of the children. According to news reports, she was feeding the babies liquor to keep them from crying. She was prosecuted.

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Starting Out is a column for and about higher-education students and new graduates who are learning fraud examination principles. This column is a revised version of a paper on the Adelphia fraud that was written for Dr. Leonard Stokes' fraud examination class at Siena College of Loudonville, N.Y.

In the ACFE's "Interviewing for Auditors" course, which I teach, participants are given an opportunity to identify their problem areas in the interview process and have a chance to focus on the knowledge they'd like to receive from the course. Below are submissions from two participants and my responses.